<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
CALENERGY COMPANY, INC.
- - -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[CALENERGY LOGO]
CALENERGY COMPANY, INC.
302 SOUTH 36TH ST., SUITE 400
OMAHA, NE 68131
April 3, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
CalEnergy Company, Inc. to be held at The Joslyn Art Museum, 2200 Dodge
Street, Omaha, Nebraska on May 21, 1998 at 9:00 A.M., local time.
The following matters will be considered and acted upon at the Annual
Meeting: (i) election to the Board of Directors of the Company of four Class
III Directors; (ii) approval and ratification of an amendment of the
Company's Employee Stock Option Plan to increase the number of option shares
available for grant under the Plan by 1,000,000 as there are currently only
168,803 option shares remaining available for grant under the plan; (iii)
ratification of the appointment by the Board of Directors of Deloitte &
Touche LLP as auditors of the Company for the 1998 fiscal year; and (iv)
transaction of such other business as may properly come before the meeting.
Information concerning the matters to be considered and voted upon at the
Annual Meeting is set forth in the attached Notice of Annual Meeting and
Proxy Statement. We encourage you to review the attached material carefully
and to sign, date and return the enclosed proxy card in the enclosed
postage-paid envelope. Each proxy is revocable and will not affect your right
to vote in person if you attend the meeting.
Sincerely,
/s/ David L. Sokol
David L. Sokol
Chairman of the Board
<PAGE>
[CALENERGY LOGO]
CALENERGY COMPANY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1998
To the Stockholders of CalEnergy Company, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of
CalEnergy Company, Inc. will be held at The Joslyn Art Museum, 2200 Dodge
Street, Omaha, Nebraska on May 21, 1998 at 9:00 A.M. local time for the
following purposes:
1. To elect to the Board of Directors of the Company four Class III
Directors (with terms expiring at the May 2001 annual meeting);
2. To approve and ratify an amendment of the Company's Employee Stock
Option Plan to increase the aggregate number of option shares that are
available for grant under the plan by 1,000,000 as there are currently
only 168,803 option shares remaining available for grant under the plan;
3. To ratify the appointment by the Board of Directors of Deloitte &
Touche LLP as auditors of the Company for fiscal year 1998; and
4. To act upon such other matters as may properly come before the
meeting.
All Stockholders of record at the close of business on March 23, 1998 are
entitled to vote at the Annual Meeting.
To ensure that your shares are represented, you are urged to please fill
in, sign, date and return the enclosed proxy card promptly in the enclosed
postage-paid envelope. You may revoke your proxy at any time before it is
voted at the Annual Meeting. If you attend the meeting, you may vote your
shares in person.
Please date your proxy card and sign it exactly as your name appears on
the proxy card.
By Order of the Board of
Directors
/s/ David L. Sokol
David L. Sokol
Chairman of the Board
April 3, 1998
<PAGE>
CALENERGY COMPANY, INC.
302 SOUTH 36TH ST., SUITE 400
OMAHA, NE 68131
PROXY STATEMENT
APRIL 3, 1998
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 21, 1998
SOLICITATION AND VOTING
This Proxy Statement (the "Proxy Statement") is furnished in connection
with the solicitation of proxies on behalf of the Board of Directors (the
"Board") of CalEnergy Company, Inc. (the "Company") to be voted at the Annual
Meeting of Stockholders to be held on May 21, 1998, or any adjournment
thereof (the "Annual Meeting"). This Proxy Statement, the Notice of Annual
Meeting and the accompanying Proxy are being mailed to Stockholders on or
about April 3, 1998.
The Voting Stock of the Company (the "Voting Stock") consists of the
Common Stock of the Company, $0.0675 par value (the "Common Stock"), which
was outstanding on the record date. Holders of the Common Stock will vote as
a single class at the Annual Meeting. Each share of Common Stock will be
entitled to one vote on all matters presented at the Annual Meeting.
The close of business on March 23, 1998 is the Record Date (the "Record
Date") for determining the holders of the outstanding Voting Stock (the
"Stockholders") entitled to vote at the Annual Meeting. On the Record Date,
60,411,059 shares of Common Stock were outstanding.
The approval of a plurality of the Voting Stock present in person or by
proxy, and entitled to vote at the Annual Meeting is required for the
election of nominees as Directors of the Company. The approval of a majority
of the Voting Stock present in person or by proxy, and entitled to vote, at
the Annual Meeting is required for approval of both Proposal 2 (Increase
shares authorized for issuance under the Company's 1996 Stock Option Plan
(the "Employee Stock Option Plan")), and Proposal 3 (ratification of
selection of Independent Auditors). A quorum equal to a majority of the
outstanding Voting Stock must be present in person or by proxy at the Annual
Meeting in order to elect Directors and consider Proposals 2 and 3.
All shares of Voting Stock represented by properly executed proxies which
are returned and not revoked will be voted in accordance with the
instructions, if any, given therein. If no instructions are provided in a
proxy, it will be voted FOR the Board's nominees for Director, FOR the
approval of Proposals 2 and 3 and in accordance with the proxy-holders' best
judgment as to any other matters raised at the Annual Meeting. Abstentions
and broker non-votes will be counted as shares present for purposes of
establishing a quorum with respect to the proposals with respect to which
they apply. Abstention votes will be counted as voted AGAINST the proposals
with respect to which they apply. Broker non-votes will not be considered as
either FOR or AGAINST votes with respect to the proposals to which they
apply. The proxy is revocable and any Stockholder who executes a proxy may
revoke it at any time before it is voted by delivering to the Secretary of
the Company a written statement revoking the proxy, by executing and
delivering to the Secretary of the Company a later dated proxy or by voting
in person at the Annual Meeting.
Expenses in connection with this solicitation of proxies will be paid by
the Company. Upon request, the Company will reimburse brokers, dealers, banks
or similar entities acting as nominees for reasonable expenses incurred in
forwarding copies of these proxy materials to the beneficial owners of shares
which
<PAGE>
such persons hold of record. The Company has engaged MacKenzie Partners, Inc.
to solicit proxies for the Annual Meeting for a fee of approximately $15,000,
plus reimbursement of reasonable expenses. In addition, solicitation of
proxies may be made through the mail, in person and by facsimile and
telephone by certain directors, officers and regular employees of the
Company.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board currently consists of twelve members divided into three classes
serving staggered three-year terms.
Class III Nominees. The Board has unanimously nominated Walter Scott, Jr.,
John Shiner, Edgar Aronson and Bernard Reznicek for election at the Annual
Meeting as Class III Directors, with terms expiring at the May 2001 annual
meeting of Stockholders.
Messrs. Scott, Aronson, Shiner, and Reznicek have consented to serve if
elected. If a nominee becomes unable to serve if elected, proxies will be
voted for such other person, if any, as the Board may nominate, or the Board
may be reduced in size accordingly. The Board knows of no reason why any
nominee will be unable to serve if elected.
The approval of a plurality of the Voting Stock present in person or by
proxy, and entitled to vote, at the Annual Meeting is required for election
of the nominees as directors. A quorum equal to the majority of the
outstanding Voting Stock must be present in person or by proxy at the Annual
Meeting in order to elect directors. If no instructions are provided in a
proxy, it will be voted FOR the Board's nominees for directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ABOVE-NAMED
NOMINEES.
BOARD OF DIRECTORS
In addition to the above-named current and nominated Directors, the Board
includes the following seven persons, each having a term expiring at the
annual meeting in the year indicated:
<TABLE>
<CAPTION>
YEAR OF
NAME CLASS EXPIRATION OF TERM
- - ---- ----- ------------------
<S> <C> <C>
Judith E. Ayres ClassI 1999
Richard K. Davidson ClassI 1998(1)
David L. Sokol ClassI 1999
David E. Wit ClassI 1999
David H. Dewhurst ClassII 2000
Richard r. Jaros ClassII 2000
David R. Morris ClassII 2000
Sir Neville G. Trotter ClassII 2000
</TABLE>
- - ------------
(1) Mr. Davidson (a Class I director) will be resigning from the Board at
the Annual Meeting, at which time the Board will consist of eleven
directors.
During 1997, the Board met eight (8) times and took action by unanimous
written consent twice.
The Board has an Audit Committee, a Compensation Committee, an
Environmental Committee, an Executive Committee, a Nominating Committee, and
a Stock Option Committee.
AUDIT COMMITTEE
The Audit Committee (Messrs. Jaros (Chair), Morris, Reznicek and Shiner)
is empowered to recommend to the Board independent public accounting firms
for selection as auditors of the Company;
2
<PAGE>
to make recommendations to the Board on auditing matters; to examine and make
recommendations concerning the scope of audits; and to review the terms of
transactions between the Company and related entities. The Audit Committee
met four times during 1997.
COMPENSATION COMMITTEE
The Compensation Committee (Messrs. Shiner (Chair), Aronson, Jaros and
Wit) is authorized to make recommendations to the Board with respect to
executive salaries and bonuses, directors' compensation and employee benefits
matters. The Compensation Committee met five times during 1997 and took
action by unanimous written consent once.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Jaros served as President of the Company from January 8, 1992 until
April 19, 1993 and served as Chairman of the Company from April 19, 1993
until May 5, 1994. Mr. Jaros was originally elected to the Board of the
Company as a nominee of Kiewit Energy Company ("Kiewit Energy") under an
agreement entered into in connection with Kiewit Energy's investment in the
Company in early 1991. That agreement was terminated in January 1998 in
connection with the Company's repurchase of the Kiewit Energy investment in
the Company. Mr. Jaros also owns Peter Kiewit Sons', Inc. ("Kiewit") stock.
Kiewit Energy was a subsidiary of Kiewit that the Company acquired on January
2, 1998. See "Certain Transactions and Relationships." Messrs. Aronson,
Shiner and Wit have not been employees of the Company or otherwise
participated in activities constituting compensation committee interlocks or
insider participation requiring disclosure under this caption.
ENVIRONMENTAL COMMITTEE
The Environmental Committee (Ms. Ayres (Chair) and Messrs. Aronson,
Reznicek and Trotter) addresses issues and provides advice concerning
environmental regulations and compliance. The Environmental Committee met
four times during 1997.
EXECUTIVE COMMITTEE
The Executive Committee (Messrs. Sokol (Chair), Davidson, Jaros and Scott)
was established to act for the Board in between regularly scheduled Board
meetings. The Executive Committee did not meet during 1997.
NOMINATING COMMITTEE
The Nominating Committee (Messrs. Sokol (Chair), Davidson, Jaros and Wit)
was established to provide the Board with advice regarding potential nominees
to the Board. The Nominating Committee did not meet during 1997. The
Nominating Committee will consider qualified nominees recommended by holders
in the aggregate of 5% or more of the Voting Stock. The Nominating Committee
is under no obligation, however, to nominate any person so recommended. The
Nominating Committee is not presently considering any nominations to the
Board.
STOCK OPTION COMMITTEE
The Stock Option Committee (Messrs. Jaros (Chair), Reznicek, Scott and
Shiner) was established to provide disinterested administration of the
Company's Employee Stock Option Plan pursuant to the requirements of the
SEC's Rule 16b-3. The Stock Option Committee acted by written consent four
times during 1997.
3
<PAGE>
INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS
AND DIRECTORS IN OFFICE
DAVID L. SOKOL: 41. Chairman of the Board of Directors and Chief Executive
Officer. Mr. Sokol has been CEO since April 19, 1993 and served as President
of the Company from April 19, 1993 until January 21, 1995. He has been
Chairman of the Board of Directors since May 1994. Mr. Sokol has been a
director of the Company since March 1991. Formerly, among other positions
held in the independent power industry Mr. Sokol served as the President and
Chief Executive Officer of Kiewit Energy, a wholly owned subsidiary of Peter
Kiewit Sons' Inc. and Ogden Projects, Inc.
EDGAR D. ARONSON: 63. Mr. Aronson has been a director of the Company since
April 1983. Mr. Aronson founded EDACO, Inc., a private venture capital
company, in 1981, and has been President of EDACO, Inc. since that time.
Prior to that, Mr. Aronson was Chairman, Dillon, Read International from 1979
to 1981 and a General Partner in charge of the International Department at
Salomon Brothers Inc from 1973 to 1979. Mr. Aronson served during 1962-1968
as Vice President consecutively in the International Departments of First
National Bank of Chicago and Republic National Bank of New York. He founded
the International Department of Salomon Brothers and Hutzler in 1968.
JUDITH E. AYRES: 53. Ms. Ayres has been a director of the Company since
July 1990. Since 1990, Ms. Ayres has been Principal of The Environmental
Group, an environmental consulting firm in San Francisco, California. From
1988 to 1989, Ms. Ayres was a Vice President of William D. Ruckelshaus
Associates, an environmental consulting firm. From 1983 to 1988, Ms. Ayres
was the Regional Administrator of Region 9 (Arizona, California, Hawaii,
Nevada and the Western Pacific Islands) of the United States Environmental
Protection Agency.
RICHARD K. DAVIDSON: 56. Mr. Davidson was appointed a Director of the
Company in March 1993. On January 1, 1997, Mr. Davidson became Chairman,
President and Chief Executive Officer of Union Pacific Corporation. Prior to
that, he was Union Pacific Corporation's President and Chief Operating
Officer. He also is Chairman and CEO of Union Pacific Railroad. Mr. Davidson
became part of Union Pacific Railroad when it merged with the Missouri
Pacific and the Western Pacific Railroads in 1982. He was promoted to Vice
President-Operations in 1986 and Executive Vice President-Operations of the
Railroad in 1989. He was appointed President and CEO of the Railroad in
August 1991 and Chairman the following month. Mr. Davidson will be resigning
from the Company's Board at the Annual Meeting.
DAVID H. DEWHURST: 54. Mr. Dewhurst has been a director of the Company
since August 1996. Mr. Dewhurst was the founder, Chairman and Chief Executive
Officer of Falcon Seaboard Resources, Inc. for many years and is presently
Chairman and Chief Executive Officer of Falcon Seaboard Holdings, L.P. Mr.
Dewhurst served as an officer in the U.S. Air Force from 1968-1970 and was a
Foreign Service Reserve Officer in the U.S. Department of State from
1971-1973. Mr. Dewhurst currently serves on the National Board of Directors
of Citizens for a Sound Economy.
RICHARD R. JAROS: 46. Mr. Jaros has been a director of the Company since
March 1991. Mr. Jaros served as President and Chief Operating Officer of the
Company from January 8, 1992 to April 19, 1993 and as Chairman of the Board
from April 19, 1993 to May 1994. Mr. Jaros is currently a director of Kiewit.
From 1990 until January 8, 1992, Mr. Jaros served as a Vice President of
Kiewit and from April 1993 to July 1997 as Executive Vice President and Chief
Financial Officer of Kiewit and from July 1996 to July 1997 as President of
Kiewit Diversified Group ("KDG"). Mr. Jaros serves as a director of
Commonwealth Telephone, RCN Corporation and WorldCom.
DAVID R. MORRIS: 63. Mr. Morris was appointed a director of the Company in
February 1997. Mr. Morris was Chairman of Northern Electric plc from 1989 to
January 1997. In 1980 he joined Delta plc becoming Managing Director of the
Switchgear and Accessories Division in 1981 and a Board Director in 1984.
Prior to that, Mr. Morris was Managing Director of Wildt Mellor Bromley Ltd.,
a subsidiary of Sears Holdings, plc, from 1975 to 1980. From 1958 to 1975,
Mr. Morris was employed by English Electric, which merged with GEC, in
production, development and general management. Mr. Morris has served as a
director of Delta Group plc, EA Technology, Regional Technology Centre
(North) Ltd. and Northern Arts.
4
<PAGE>
BERNARD W. REZNICEK: 61. Mr. Reznicek has been a director of the Company
since May 1995. Mr. Reznicek has been President, Premier Enterprises and
National Director, Utility Marketing for Central States Indemnity Co. of
Omaha since January, 1997. Prior to that, he was Dean, College of Business
Administration at Creighton University. From 1987 to 1994, Mr. Reznicek was
the Chairman, President and Chief Executive Officer of Boston Edison Company
and was the President and Chief Executive Officer of the Omaha Public Power
District from 1981 to 1987. Mr. Reznicek serves on the Board of Directors of
Stone & Webster, Incorporated, State Street Corporation, Guarantee Life
Companies, Inc. and the Nebraska Humane Society.
WALTER SCOTT, JR.: 66. Mr. Scott has been a director of the Company since
June 1991. Mr. Scott was the Chairman and Chief Executive Officer of the
Company from January 8, 1992 until April 19, 1993. Mr. Scott is Chairman and
President of Kiewit, a position he has held since 1979. Mr. Scott is a
director of Berkshire Hathaway, Inc., Burlington Resources, Inc., ConAgra,
Inc., Valmont Industries, Inc., U.S. Bancorp, Commonwealth Telephone
Enterprises, Inc., and RCN Corporation, a publicly-traded company in which
Kiewit holds a majority ownership interest.
JOHN R. SHINER: 54. Mr. Shiner was elected as a director of the Company in
May 1995. He joined the law firm of Morrison & Foerster in 1993, where he is
a partner resident in the Los Angeles office. Prior to that time, he was a
partner in the law firm of Baker & McKenzie. Mr. Shiner has practiced law in
Los Angeles since 1968, specializing in litigation and consultation with the
senior management and Boards of closely held and public corporations.
SIR NEVILLE G. TROTTER: 66. Sir Neville was appointed a director of the
Company in May 1997. In June 1997 he was appointed a Deputy Lieutenant of the
County of Tyne and Wear to assist the Lord Lieutenant as a representative of
Queen Elizabeth. He was elected a Member of Parliament from 1974 to 1997
serving as a Member of the Trade & Industry Select Committee, Defence Select
Committee and the Transport Select Committee. He is a Chartered Accountant
and continued to practise as an active Consultant with Grant Thornton after
his election to Parliament having previously been a Senior Partner and member
of the firm's National Executive Team. He currently serves as Non-Executive
Director or Advisor with several British corporations and trade associations.
He is Vice President of the British Marine Equipment Council and a Member of
the Council of the North East Chamber of Commerce Trade and Industry based in
Newcastle upon Tyne.
DAVID E. WIT: 36. Mr. Wit has been a director of the Company since April
1987. He is Co-Chief Executive Officer of Logicat Inc., a software
development/publishing firm. Prior to working at Logicat Inc., Mr. Wit worked
at E.M. Warburg, Pincus & Company, where he analyzed seed-stage financing and
technology investments.
INFORMATION REGARDING DIRECTORS EMERITUS:
Directors Emeritus are former Board members who are appointed by the
Board. The position of Director Emeritus recognizes an individual's
long-standing advice and counsel to the Company after retirement from Board
membership. Directors Emeritus may attend but not vote at Board meetings and
receive no annual or daily director fees for such attendance.
BEN HOLT: 83. Mr. Holt retired as a Board member and was appointed
Director Emeritus at the May 1997 annual meeting after serving as a director
of the Company since September 1993. Mr. Holt is the founder, and was
Chairman and Chief Executive Officer of The Ben Holt Co., an engineering firm
located in Pasadena, California, which the Company acquired in September 1993
and sold in 1997. Mr. Holt retired as Chairman and CEO of The Ben Holt Co. in
December 1993 and thereafter served as a consultant to the Company.
EVERETT B. LAYBOURNE: 85. Mr. Laybourne retired as a Board member and was
appointed Director Emeritus by the Board in May 1995 after serving as a
director of the Company since May 1988. For many years he served as counsel
for a number of major publicly-held corporations. He also presently serves as
Vice President and Trustee of The Ralph M. Parsons Foundation and as National
Board
5
<PAGE>
Chairman of WAIF, Inc. From 1969 to 1988, Mr. Laybourne was senior partner in
the law firm of MacDonald, Halsted & Laybourne in Los Angeles, California,
whose successor firm was Baker & McKenzie to which he acted for five years in
an "of counsel" capacity. He continues in the practice of law in Los Angeles.
BARTON W. SHACKELFORD: 76. Mr. Shackelford retired as a Board member and
was appointed Director Emeritus by the Board in May 1995 after serving as a
director of the Company since June 1986. Mr. Shackelford served as President
and a director of Pacific Gas & Electric Company from 1979 until his
retirement in 1985. He is a director of Harding Associates, Inc.
PROPOSAL 2
AMENDMENT OF EMPLOYEE STOCK OPTION PLAN
PROPOSAL 2 IS TO APPROVE AN AMENDMENT TO THE COMPANY'S EMPLOYEE STOCK
OPTION PLAN DESCRIBED BELOW AND ATTACHED AS EXHIBIT A. A DETAILED SUMMARY OF
THE PLAN IS CONTAINED IN EXHIBIT B HERETO, TO WHICH REFERENCE SHOULD BE MADE.
The Board has unanimously approved and recommended to the Stockholders an
amendment to the Company's Employee Stock Option Plan. The Employee Stock
Option Plan provides for options to purchase Common Stock. As of the Record
Date, only 168,803 option shares remain available for grant under the
Employee Stock Option Plan. The proposed amendment provides that the
aggregate amount of option shares that are available for grant under the Plan
will be increased by 1,000,000. A copy of the proposed amendment is set forth
in Exhibit A.
The Company believes that the granting of options under the Employee Stock
Option Plan plays an important role in the Company's ability to attract and
retain employees of outstanding ability. The Board believes that the
amendment to the Employee Stock Option Plan to provide 1,000,000 additional
option shares to be available effective as of the date of the amendment for
grant under the plan is necessary to ensure that the Company can continue to
attract and retain such persons. As noted above, only 168,803 option shares
remain available for grant under the Employee Stock Option Plan.
The approval of a majority of the Voting Stock present in person or by
proxy, and entitled to vote at the Annual Meeting is required for approval of
Proposal 2. A quorum equal to the majority of the outstanding Voting Stock
must be present in person or by proxy at the Annual Meeting in order to vote
on Proposal 2. If no instructions are provided in a proxy, it will be voted
for the approval of Proposal 2.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
PROPOSAL 3 IS TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE 1998 FISCAL YEAR.
The Board, upon the recommendation of the Audit Committee, has unanimously
appointed Deloitte & Touche LLP as the independent accounting firm engaged to
audit the financial statements of the Company for the 1998 fiscal year.
Deloitte & Touche LLP acted in that capacity for the 1997 fiscal year. A
representative of Deloitte & Touche LLP is expected to be present at the
Annual Meeting and will be available to respond to appropriate questions and
will have an opportunity to make a statement if desired.
The approval of a majority of the Voting Stock present in person or by
proxy, and entitled to vote, at the Annual Meeting is required for approval
of Proposal 3. A quorum equal to the majority of the outstanding Voting Stock
must be present in person or by proxy at the Annual Meeting in order to vote
on Proposal 3. If no instructions are provided in a proxy, it will be voted
FOR the approval of Proposal 3.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
6
<PAGE>
OTHER MATTERS
The Board knows of no other matters which are likely to be brought before
the Annual Meeting. However, if any other matters are brought before the
Annual Meeting, the proxy-holders will vote proxies granted by Stockholders
in accordance with their best judgment.
SECURITY OWNERSHIP OF SIGNIFICANT STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information with respect to all
Stockholders known by the Company to beneficially own more than 5% of either
class of the Voting Stock, and certain information with respect to the
beneficial ownership of each director and the five most highly compensated
executive officers of the Company (and all directors and executive officers
of the Company, as a group) of Common Stock. All information is as of March
23, 1998, unless otherwise indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME (AND ADDRESS IF REQUIRED) BENEFICIALLY PERCENTAGE OF
OF BENEFICIAL OWNER OWNED (1) CLASS (1)
------------------- --------- ---------
<S> <C> <C>
COMMON STOCK:
Neuberger & Berman LLC (2) .......... 3,754,938 6.22
Putnam Investments, Inc. (3) ....... 5,798,566 9.60
Edgar D. Aronson .................... 42,889 0.07
Judith E. Ayres ..................... 55,500 0.09
Richard K. Davidson ................. 42,389 0.07
David Dewhurst ...................... 78,389 0.13
Richard R. Jaros .................... 319,115 0.53
David Morris ........................ 8,900 0.01
Bernard W. Reznicek ................. 16,981 0.03
Walter Scott, Jr. ................... 2,013,489 3.33
John R. Shiner ...................... 21,000 0.03
David L. Sokol ...................... 580,523 0.95
Neville Trotter ..................... 20,000 0.03
David E. Wit (4) .................... 22,485 0.04
Gregory E. Abel ..................... 206,679 0.34
Thomas R. Mason ..................... 195,527 0.32
Steven A. McArthur .................. 175,285 0.29
Donald M. O'Shei, Jr. ............... 101,530 0.17
All directors and executive officers
as a group (33 persons)............. 4,333,825 6.94
</TABLE>
- - ------------
(1) Includes shares which the listed beneficial owner is deemed to have the
right to acquire beneficial ownership under Rule 13d-3(d) under the
Securities Exchange Act, including, among other things, shares which
the listed beneficial owner has the right to acquire within 60 days.
(2) According to a Schedule 13G filed by such party on February 17, 1998.
The mailing address for Neuberger & Berman LLC is 605 Third Avenue, New
York, NY 10158-3698.
(3) According to an amended Schedule 13G filed by such party on January 28,
1998 on behalf of itself and Marsh & McLennan Companies, Inc., Putnam
Investment Management, Inc. and Putnam Advisory Company, Inc. The
mailing address for Putnam Investments, Inc. is One Post Office Square,
Boston, MA 02109.
(4) Includes 9,996 shares held jointly with his spouse.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation is determined by the Compensation
Committee of the Board. The Compensation Committee usually meets from time to
time during the year as may be required and at least once a year in December,
at which time salaries with respect to the next fiscal year, and
7
<PAGE>
bonuses with respect to the nearly completed year are determined, as well as
making recommendations to the Stock Option Committee for stock option or, if
applicable, restricted stock grants as long-term incentive compensation and
making other determinations or recommendations with respect to employee
benefit plans and related matters.
The Compensation Committee believes that compensation of the Company's key
executives should be sufficient to attract and retain highly qualified and
productive personnel and also to provide meaningful incentives for enhanced
productivity and superior performance. It is the policy of the Company that
the three primary components of the Company's total compensation package
(salary, bonuses and grants of stock options or, if applicable, restricted
stock) will be considered in the aggregate in determining the amount of any
one component. The Company seeks to reward achievement of long and short-term
individual performance goals, viewed in the context of both individual power
or other infrastructure project and Company performance. However, given the
unique nature of each independent development project (particularly
considering the context of the different legal, regulatory, financial,
accounting, tax, political and cultural systems, issues and structures found
in various countries in which the Company develops or acquires or joint
ventures on projects internationally) and the resulting flexible adaptation
required in the duties and tasks performed by the Company's key executives,
the Compensation Committee's criteria for assessing executive performance in
any year is inherently subjective and not subject to specific enumeration of
factors, relative weighting or formulae calculations. The Company did not
specifically use any companies in the same industry as a basis for comparison
when establishing executive compensation.
During 1997, the Company's executive compensation generally included a
base salary, cash bonuses and long-term incentive compensation in the form of
stock options awarded under the Company's Employee Stock Option Plan, all
dependent on subjective evaluations of performance as noted above. The cash
bonus compensation of executives is designed to compensate executives for the
Compensation Committee's assessment of superior performance and meritorious
and diligent individual efforts, and such assessments usually relate to
individual and unique projects and, in part, also recognize the individual
executive's level of commitment (demonstrated by subjective factors) to the
Company's long-term success. The long-term incentive option grants
recommended by the Compensation Committee and implemented by the Stock Option
Committee are intended to align the interests of employees and Stockholders
and thereby to motivate executives as equity owners to contribute at superior
levels in the future and to allow them to share in increased value developed
for Stockholders generally.
The Company's Chairman and Chief Executive Officer, has an existing
employment agreement with the Company which has a term of five years (ending
August 2000 unless extended). As amended in August 1996 by Committee action,
Mr. Sokol's employment agreement provided for a base salary of $500,000 per
annum and a minimum annual bonus of $400,000. The employment contract also
provides for the payment of three years base salary and average bonus in the
event of termination without cause.
In April the Compensation Committee (acting in conjunction with the
Section 162(m) Sub Committee of the Stock Option Committee) approved the
issuance of 1,000,000 Performance Accelerated Stock Options to Mr. Sokol,
pursuant to which vesting would accelerate and up to an aggregate of 400,000
"reload" options would be issued if the Company's stock price achieved the
levels of $38, $44, $50, and $56 respectively under certain conditions and
over certain designated time periods, as well as making grants of similar
performance based options to certain other executives.
At its December 1997 meeting, the Compensation Committee determined to
increase Mr. Sokol's annual salary under his employment contract to $675,000
and to award Mr. Sokol a cash bonus of $2,250,000 in order to reflect Mr.
Sokol's superior performance and significant accomplishments during the year.
In addition, at the Compensation Committee's December 1997 meeting, the
Compensation Committee authorized salary increases, cash bonuses and, if
applicable, recommendations for stock option grants to other executives
commensurate with the Compensation Committee's subjective assessment of their
relative individual performance.
In reviewing Mr. Sokol's compensation, the Compensation Committee
subjectively considered Mr. Sokol's significant contribution to the
management of the Company during the year, including:
8
<PAGE>
successfully negotiating, structuring and executing a definitive acquisition
agreement to acquire the common equity interests in the Company and
international project partnership interests in Northern and the Company's
Asian power projects held by the Kiewit Diversified Group (the "KDG
Acquisition"); successfully consummating and integrating the strategic
Northern Electric plc acquisition which resulted in the Company entering into
the electrical distribution and supply and related businesses in the U.K.;
the successful issuance of $350,000,000 principal amount of the Company's
7.63% Senior Notes Due 2007; and the successful marketing and sale of 19.1
million common shares at a price of $37 7/8 per share (both of such issuances
were effected to provide the requisite funding for the KDG Acquisition); the
successful financial closing of the innovative $400,000,000 CE Indonesia
Funding Corporation non-recourse revolving credit construction loan facility
for the Company's Indonesian projects; the successful restructuring of the
Casecnan project construction arrangements in light of the insolvency of the
contractor; the deemed completion of and commencement of receipt of revenues
from the Mahanagdong and Malitbog projects; commencing construction and
closing the financing on the Patuha Unit I and Dieng Unit II projects in
Indonesia; the successful issuance by a special purpose subsidiary trust of
$225,000,000 6 1/2% Convertible Preferred Securities; the significant
progress of the Company's drilling, permitting and development efforts on the
Dieng, Patuha and Bali Projects in Indonesia; the Company's other promising
project development and acquisition activities and achievement of record
electrical production levels at the Imperial Valley Projects. Mr. Sokol
contributed very significantly to these achievements and the Company's
current success, and the Compensation Committee believes his overall
compensation was wholly justified. Section 162(m) of the Internal Revenue
Code, enacted in 1993, generally disallows a tax deduction to public
companies for compensation over $1 million paid to the chief executive or any
of the four other most highly compensated executive officers. However,
certain compensation meeting a tax law definition of "performance-based" is
generally exempt from this deduction limit. The Company does not currently
intend to qualify cash compensation paid to executive officers for
deductibility under Section 162(m). Further, in general, the Company does not
currently have a policy that requires or encourages the Committee to qualify
other types of compensation awarded to executive officers for deductibility
under Section 162(m). However, the Company has included provisions in the
Employee Stock Option Plan designed to enable option grants made to executive
officers affected by Section 162(m) to qualify as "performance-based"
compensation if the Committee determines that it is appropriate to make such
qualifying grants.
COMPENSATION COMMITTEE
John R. Shiner, Chair
Edgar D. Aronson
Richard R. Jaros
David E. Wit
9
<PAGE>
PERFORMANCE GRAPH
The following performance graph shall not be deemed to be incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates such information by reference, and shall not otherwise be deemed
filed under such Acts.
The following graph compares the yearly percentage change in the
cumulative weighted average total return on the Company's Common Stock with
the cumulative total return assuming reinvestment of dividends of (1) the S&P
400 Index, (2) the S&P Utilities Index and (3) an index of comparable peer
issuers constructed by the Company. The index of comparable peer issuers is
composed of AES Corp., Calpine Corp., Trigen Energy Corp., Southern Electric
plc and Enron Corp. during the periods that each company has been publicly
traded. In compliance with Securities and Exchange Commission regulations,
the returns of each of the comparables have been weighted according to
capitalization as of the beginning of the five year period.
Destec Energy Inc. and Enron Global Power and Pipelines, L.L.C. have been
removed from last year's list of comparables since they are no longer
publicly traded and have been replaced by Trigen Energy Corp., Southern
Electric plc and Enron Corp.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
CALENERGY COMPANY, INC.
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------
Weighted Comparables 100.00% 128.04% 137.37% 175.81% 173.09% 203.67%
CalEnergy Company, Inc. 100.00% 110.45% 93.28% 116.42% 200.75% 171.64%
S&P Utilities 100.00% 114.41% 105.49% 147.93% 154.43% 187.84%
S&P 400 100.00% 109.03 113.24 151.61 187.34 243.49%
10
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation of the Company's five most
highly compensated executive officers who were employed as of the last day in
1997. Information is provided regarding these individuals for the last three
fiscal years during which they were executive officers of the Company, if
applicable.
<TABLE>
<CAPTION>
BONUS OTHER ANNUAL SECURITIES ALL OTHER
--------------------- COMPENSATION RESTRICTED UNDERLYING COMPENSATION
NAME AND YEAR ENDED SALARY CASH (1) STOCK (2) (3) STOCK AWARDS OPTIONS (5)
PRINCIPAL POSITIONS DECEMBER 31, ($) ($) ($) ($) ($) (#) ($)
- - --------------------- -------------- --------- --------- ----------- -------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David L. Sokol 1997 515,000 2,377,280 0 0 0 1,200,000 4,927
Chairman and 1996 500,000 1,500,000 0 0 0 200,000 4,927
Chief Executive 1995 436,388 854,025 1,280,000 0 $3,840,000(2)(4) 0 4,429
Officer
Gregory E. Abel 1997 173,573 335,742 0 146,711 0 150,000 4,333
President and Chief 1996 129,202 218,947 0 0 0 130,000 3,820
Operating Officer 1995 103,145 142,935 0 0 0 10,000 3,630
Thomas R. Mason 1997 210,000 133,975 0 0 0 60,000 5,681
President, CalEnergy 1996 210,000 129,994 0 0 0 20,000 5,681
Operating Company 1995 198,675 326,116 0 0 0 30,000 5,344
Steven A. McArthur 1997 168,920 487,941 0 0 0 150,000 3,930
Executive Vice 1996 164,000 392,369 0 0 0 40,000 3,917
President, General 1995 162,800 315,789 0 0 0 0 3,809
Counsel and
Secretary
Donald M. O'Shei, Jr. 1997 171,421 125,958 0 119,267 0 120,000 3,935
President, CalEnergy 1996 120,000 80,000 0 113,041 0 25,000 3,801
Development Company 1995 100,000 80,000 0 90,550 0 50,000 3,404
</TABLE>
- - ------------
(1) Includes amounts voluntarily deferred by the executive, if applicable.
(2) On November 29, 1995, Mr. Sokol relinquished vested options for 500,000
shares of the Company's common stock having a per share exercise price
of $19.00 in exchange for 500,000 shares of restricted stock, 125,000
shares of which vested on the date of grant with the remaining 375,000
shares vesting at the rate of 6,250 shares per month over 56 months
beginning December 1995. The 125,000 immediately vested shares are
reflected in the bonus (stock) column with the remaining 375,000 shares
reflected in the restricted stock column. The dollar amount for the
125,000 share award shown as a bonus was calculated by multiplying the
closing market price of the Company's common stock on the date of the
exchange times the number of bonus shares ($2,375,000), less the option
relinquishment cost on that date ($1,095,000) of options to purchase
125,000 shares relinquished by Mr. Sokol. The option relinquishment
cost was calculated using the standard Black-Scholes option pricing
model. The dollar amount for the 375,000 share award shown as
restricted stock was calculated by multiplying the closing market price
of the Company's common stock on the date of the exchange times the
number of restricted shares ($7,125,000), less the option
relinquishment cost as calculated pursuant to the preceding sentence
($3,285,000) of options for 375,000 shares relinquished by Mr. Sokol.
The 500,000 options relinquished by Mr. Sokol had a potential
realizable value as of 12/31/94 (as reported in the Company's 1994
Proxy Statement) of $5,974,498 assuming a 5% annualized stock price
appreciation rate for the 10-year option term, and $15,140,553,
assuming a 10% annualized stock price appreciation rate for the 10-year
option term.
(3) Includes various expatriate compensation items, including expatriate
allowances, company provided transportation, housing and tax benefits.
(4) As of December 31, 1997, Mr. Sokol held 75,000 shares of unvested
restricted stock with a dollar value, based on the closing price of the
Company's common stock on December 31, 1997, of $2,156,250, without
deducting the option relinquishment cost ($4,380,000) calculated
pursuant to the standard Black-Scholes option pricing model reflected
in footnote 2 above. If dividends are paid on the Company's common
stock, dividends will be paid on the restricted stock at the same rate.
(5) 401(k) Plan contributions and group term life insurance premiums.
11
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth options granted to each of the named
executive officers of the Company during 1997:
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
% OF STOCK PRICE APPRECIATION
TOTAL OPTIONS FOR OPTION TERM (2)
GRANTED TO EXERCISE --------------------------
SECURITIES UNDERLYING EMPLOYEES PRICE EXPIRATION 5% 10%
NAME OPTIONS GRANTED (1) IN FISCAL YEAR ($/SHARE) DATE ($) ($)
- - ---- ------------------- -------------- -------- ---- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
David L. Sokol 1,000,000 39.79 34.1250 04/15/2007 $14,378,890 $36,438,929
David L. Sokol 200,000 7.96 40.8125 05/22/2007 3,439,346 8,715,978
Gregory E. Abel 125,000 4.97 34.1250 04/15/2007 1,797,361 4,554,866
Gregory E. Abel 25,000 .99 40.8125 05/22/2007 429,918 1,089,497
Thomas R. Mason 50,000 1.99 34.1250 04/15/2007 718,944 1,821,946
Thomas R. Mason 10,000 0.40 40.8125 05/22/2007 171,967 435,799
Steven A. McArthur 125,000 4.97 34.1250 04/15/2007 1,797,361 4,554,866
Steven A. McArthur 25,000 .99 40.8125 05/22/2007 429,918 1,089,497
Donald M. O'Shei, Jr. 100,000 3.98 34.1250 04/15/2007 1,437,889 3,643,893
Donald M. O'Shei, Jr. 20,000 .80 40.8125 05/22/2007 343,935 871,598
</TABLE>
- - ------------
(1) All of these performance accelerated stock options have a ten year term
and vest and become exerciseable based upon the Company's stock price
achieving the levels of $38, $44, $50 and $56 under certain conditions
and over designated time periods.
(2) As Required by the Securities and Exchange Commission ("SEC"),
potential values stated are based on the prescribed assumption that the
Company's Common Stock will appreciate in value from the date of grant
to the end of the option term (ten years from the date of grant) at
annualized rates of 5% and 10% (total appreciation of 63% and 159%),
respectively, and therefore are not intended to forecast possible
future appreciation, if any, in the price of the Company's Common
Stock. The total of all stock options granted to employees, including
executive officers, during fiscal 1997 was approximately 3% of total
shares outstanding during the year. Accordingly, the potential value of
such options for all optionees under the prescribed assumptions is
approximately 3% of the potential realizable value of all shareholders
for the same period under the same assumptions. As an alternative to
the assumed potential realizable values stated above, SEC rules would
permit stating the present value of such options at the date of grant.
Methods of computing present value suggested by different authorities
can produce significantly different results. Moreover, since stock
options granted by the Company are not transferable, there are no
objective criteria by which any computation of present value can be
verified. Consequently, the Company's management does not believe there
is a reliable method of computing the present value of such stock
options and that all assumptions as to annualized appreciation rates
are inherently speculative.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth the option exercises and the value of
in-the-money unexercised options held by each of the named executive officers
of the Company at December 31, 1997, calculated as being equal to the
difference between the exercise price of the options and the closing price of
the Company's Common Stock on the New York Stock Exchange of $28.75 per share
on December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES VALUE OPTIONS HELD AT FY END ($) IN-THE-MONEY OPTIONS AT FY END ($)
ACQUIRED REALIZED -------------------------- ---------------------------
NAME ON EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- ----------- ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David L. Sokol ........ 0 0 379,195 1,070,805 503,126 0
Gregory E. Abel ....... 0 0 170,521 224,479 1,087,794 250,644
Thomas R. Mason ....... 0 0 156,460 74,540 1,073,313 76,375
Steven A. McArthur ... 27,780 410,729 143,230 166,770 1,164,500 266,750
Donald M. O'Shei, Jr. 0 0 84,115 135,885 508,784 252,467
</TABLE>
12
<PAGE>
COMPENSATION OF DIRECTORS
For 1998, directors who are not employees of the Company will be paid an
annual retainer fee of $25,000 and a fee of $500 per day for attendance at
Board and Committee meetings. Directors who are employees of the Company will
not receive such fees. Under the Company's Non-Employee Director Stock Option
Plan, in lieu of receiving the annual $25,000 fee, directors may elect to
receive stock options having a value approximately equal to such cash amount
(approximated by reference to a Black-Scholes calculation and subject to
rounding and appropriate discounts for illiquidity). All directors are
reimbursed for their expenses incurred in attending Board meetings.
TERMINATION OF EMPLOYMENT ARRANGEMENTS
Under the terms of his employment contract, Mr. Sokol is entitled to
receive three times his base salary and bonus and three years of accelerated
option vesting (and all performance option vesting) in the event of the
termination of his employment by the Company other than for cause. Under the
terms of separate employment agreements between each of Mr. Abel and Mr.
McArthur and the Company, each of such Executives is entitled to receive two
years base salary continuation and/or payments in respect of average bonuses
for the prior two years and two years continued option vesting (and all
performance option vesting) in the event of the termination of his employment
by the Company other than for cause. If such persons were terminated without
cause, Mr. Sokol, Mr. Abel and Mr. McArthur would currently be entitled to be
paid approximately $7,360,920, $880,183 and $1,218,150, respectively,
pursuant to their employment agreements, without giving effect to any tax
related provisions.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
The Company repurchased for approximately $1.15 billion on January 2, 1998
all of the Common Stock (20,231,065 shares) and international joint venture
power project interests of the Company previously held by KDG (including
KDG's 30% interest in Northern Electric plc) pursuant to a purchase agreement
between the Company and KDG executed in September 1997 (the "KDG
Acquisition"). Prior to the KDG Acquisition, the Company and Kiewit Energy
were parties to a stock purchase agreement and related agreements, dated as
of February 18, 1991, as amended, pursuant to which in 1991 Kiewit Energy
purchased 4,000,000 shares of Common Stock and received options to buy
6,000,000 shares of Common Stock (subject to customary adjustments).
In connection with such prior agreements, Kiewit Energy became entitled to
nominate at least three of the Company's directors; and Messrs. Jaros and
Scott were Board nominees of Kiewit Energy.
On June 19, 1991, the Board approved a number of amendments to the stock
purchase agreement and the related agreements and in connection therewith
granted to Kiewit Energy an option to acquire an additional 1,000,000 shares
of the outstanding Common Stock at a price of $11.625 per share, exercisable
over ten years (subject to customary adjustments).
The Company entered into a three year joint venture agreement with Kiewit
Diversified Group, Inc. on December 14, 1993. This agreement was amended and
extended for an additional five year term on December 4, 1996. The agreement
provided a framework for the joint development of independent power projects
located outside the United States and provides for Kiewit Diversified Group
to contribute 50% of the project development expenses and equity and to pay
the Company a development fee. In addition, the projects will pay the Company
management and operating fees. Pursuant to this Joint Venture Agreement,
Kiewit Diversified Group, through its affiliate Kiewit Energy International
(Bermuda) Ltd., contributed 50% of the equity requirements for and otherwise
participating in the ownership of the Company's Mahanagdong Project Company,
CE Luzon Geothermal Power Company, Inc. and the Company's Casecnan Project
Company, CE Casecnan Water and Energy Company, Inc. in the Philippines and in
the ownership of the Dieng, Patuha and Bali projects in Indonesia on an equal
equity basis with the Company.
Pursuant to the Shareholders Agreement with Kiewit relating to the
Northern Electric plc acquisition (which, as an acquisition of an operating
business was not covered by the power project development joint
13
<PAGE>
venture agreement with Kiewit), the Company contributed 70% and Kiewit
contributed 30% of the equity and expenses. In addition, under the Northern
shareholders agreement with Kiewit, the Company received a development fee
and annual management fees.
Pursuant to the KDG Acquisition, Kiewit's 30% interest in Northern
Electric plc and all of KDG's Asian international joint venture power project
interests were acquired by the Company on January 2, 1998.
Affiliates of the Company and Kiewit have also entered into joint venture
agreements with respect to the construction of the Mahanagdong Project. CE
Luzon Geothermal Power Company, Inc. executed a First Amended and Restated
Construction Contract dated as of June 30, 1994 with Kiewit/Holt Philippines,
L.P. Kiewit/Holt Philippines, L.P. is a Nebraska limited partnership between
Kiewit Industrial Co. ("KIC"), a wholly-owned affiliate of Kiewit, and The
Ben Holt Co., Inc. ("BHC"), previously a wholly-owned subsidiary of the
Company, which was sold to Kiewit in 1997. KIC has an 80% interest in
Kiewit/Holt Philippines, L.P. and BHC owns the remaining 20% interest in the
construction joint venture. CE Luzon Geothermal Power Company, Inc. also
executed a First Amended and Restated Design, Engineering and Equipment
Supply Contract ("Mahanagdong EPC Contract") with Gilbert/CBE, L.P.
Gilbert/CBE, L.P. is a Nebraska limited partnership owned 80% by Gilbert
Industrial Corporation (a wholly owned affiliate of Kiewit) and 20% owned by
CBE Engineering Co. (a wholly owned subsidiary of the Company). The Company
and affiliates of Kiewit also entered into turnkey construction and related
contracts for certain of the Company's Indonesian projects ("Indonesian EPC
Contracts"). As noted above, all of the joint venture contracts with Kiewit
affiliates (other than the Mahanagdong EPC Contract and Indonesian EPC
Contracts) were terminated on January 2, 1998 in connection with the KDG
Acquisition.
Mr. Dewhurst, a director of the Company, was formerly the founder,
Chairman and principal shareholder of Falcon Seaboard Resources, Inc.
("Falcon") which the Company purchased (including Falcon's significant
ownership interest in three operating gas-fired cogeneration plants located
in Texas, Pennsylvania and New York and a related natural gas pipeline in New
York) in August 1996 for a cash purchase price of $226 million. In connection
with the transaction, Mr. Dewhurst received a grant of 300,000 options
(having an exercise price equal to the market price as of the date of grant)
in exchange for agreeing to enter into a seven year consulting services
contract with the Company. Subsequent to the Falcon acquisition, Mr. Dewhurst
was elected to the Company's Board of Directors. The Company's management
negotiated, and the Company's Board of Directors approved, the price paid by
the Company in such acquisition transaction. In connection with such
acquisition transaction, the Company received advice from Credit Suisse First
Boston Corporation that the consideration paid was fair to the Company from a
financial point of view.
Mr. Morris, a director of the Company, was formerly the Chairman of
Northern Electric plc., a U.K. regional electric company. In connection with
the acquisition by tender offer of Northern Electric plc by CE Electric UK
plc (a U.K. company now indirectly owned 100% by the Company) for an
aggregate amount of approximately $1.3 billion, Mr. Morris received certain
payments from Northern pursuant to certain long-standing severance
arrangements with that company and received buyout compensation for his
outstanding Northern stock and stock options on the same terms as Northern's
public shareholders and which was consistent with the treatment of all other
Northern employee and executive option holders. Subsequent to the acquisition
transaction, Mr. Morris was elected to the Company's Board of Directors and
received a grant of 20,000 stock options (having an exercise price equal to
the market price as of the date of grant) for so agreeing to serve. The
Company's management negotiated, and the Company's Board of Directors
approved, the price paid by the Company in such acquisition transaction. In
connection with such acquisition transaction, the Company received advice
from Credit Suisse First Boston Corporation that the consideration paid was
fair to the Company from a financial point of view.
The Company retained the law firm of Morrison & Foerster in 1997. Mr.
Shiner, a director of the Company, is a partner in the Los Angeles office of
Morrison & Foerster. The Company paid Morrison & Foerster a total of
approximately $1,200,000 in legal fees in 1997. The Company believes that the
fees payable to Morrison & Foerster are comparable to fees that would be
payable in similar transactions with unaffiliated third parties.
14
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, the Company is not aware of any director, officer or other
person subject to Section 16(a) of the Securities Exchange Act in respect of
the Company who failed to file on a timely basis, as disclosed in the above
Forms, reports required by Section 16(a) of the Exchange Act during the
Company's most recent fiscal year or prior fiscal years.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder intends to present at the 1999 annual
meeting of stockholder must be received by the Company not later than January
21, 1999 in order to be considered for inclusion in the proxy statement
relating to such meeting. Any such proposals should be directed to the
Secretary, CalEnergy Company, Inc., 302 South 36 Street, Suite 400, Omaha,
Nebraska 68131.
By Order of the Board of Directors
/s/ David L. Sokol
David L. Sokol
Chairman of the Board
April 3, 1998
Omaha, Nebraska
15
<PAGE>
EXHIBIT A
AMENDMENT NO. 2
TO THE
1996 STOCK OPTION PLAN
This Amendment No. 2 to the 1996 Stock Option Plan, as amended, of
CalEnergy Company, Inc. is made as of May 21, 1998 be deleting Section 4(a)
thereof in its entirety and amending and restating it to read as follows:
"(a) Basic Limitation. Shares offered under the Plan shall be authorized
but unissued Shares or Treasury Shares. The aggregate number of Shares
available for issuance after May 21, 1998 under the Plan in respect of grants
made under the Plan after such date shall not exceed 1,168,803 Shares,
subject to adjustment pursuant to Section 9 and subsection (b) below;
provided, that such limitation shall not affect or reduce the number of
shares previously reserved for issuance under the Plan with respect to
options outstanding on May 21, 1998. The Company, during the term of the
Plan, shall at all times reserve and keep available sufficient Shares to
satisfy the requirements of the Plan."
Except as modified by this Amendment No. 2, all of the terms and
conditions of the 1996 Stock Option Plan, as amended, shall remain valid and
in full force and effect.
CalEnergy Company, Inc.
By:
-------------------------------
Steven A. McArthur
Executive Vice President and
General Counsel
A-1
<PAGE>
EXHIBIT B
SUMMARY
DESCRIPTION OF EMPLOYEE
STOCK OPTION PLAN
Effective as of March 26, 1996, the Board of Directors of the Company
adopted the CalEnergy Company, Inc. 1996 Stock Option Plan (the "Plan") which
was ratified and approved by shareholders at the 1996 Annual Meeting. The
Plan provides for the issuance from time to time, as may be authorized by the
Committee (as defined below) of shares of common stock of the Company
pursuant to options to be granted to employees, officers, directors,
consultants and independent contractors of the Company. The Plan provides for
the grant of both non-qualified stock options ("NQSOs") and incentive stock
options ("ISOs") designed to meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). The purpose of the
Plan is to provide to directors, officers, other employees, consultants and
independent contractors an incentive to acquire or increase their proprietary
interests in the success of the Company and thereby more strongly align their
interests with those of stockholders generally. All employees (approximately
4,200 persons) are currently eligible to participate in the Plan although
individual participation is determined by the stock option Committee of the
Board (as defined below).
The Plan is administered by a committee of the Board of Directors
consisting of two or more Board members, appointed by the Board, who are not
officers of the Company (the "Committee"). The Committee has the discretion
to designate one or more subcommittees, including for purposes of Section
162(m) of the Code (discussed below under "Federal Income Tax Consequences").
The Plan provides for automatic annual nonqualified option grants of 1,000
shares to each member of the Committee immediately following each annual
meeting of stockholders of the Company. The exercise price of options granted
to Committee members will be the fair market value of the Company's Common
Stock on the date of grant. Grants to members of the Committee vest
immediately and are exercisable for a period of ten years from the date of
grant. Committee members may not receive option grants under the Plan other
than these automatic nonqualified option grants.
The Committee has broad discretion, subject to the terms of the Plan to
determine the persons (other than Committee members) entitled to receive
options, the terms and conditions thereof, including vesting (and accelerated
vesting of outstanding options), and the number of shares for which such
options may be granted. The Committee also has discretion to determine the
nature of the consideration to be paid upon the exercise of any option or
right to purchase stock granted under the Plan; provided that such
consideration shall generally, in the case of options at the discretion of
the Committee, consist of cash or, in the discretion of the Company (pursuant
to procedures adopted from time to time by the Committee) consist of (i)
shares of the Company's Common Stock, including the withholding of Shares
otherwise deliverable to an optionee upon exercise of the option; (ii) an
irrevocable direction to a broker to sell shares of the Company's Common
Stock and deliver all or a portion of the proceeds to the Company in payment
of the exercise price; (iii) a promissory note; or (iv) any combination of
the foregoing items (i) through (iii); provided that the Company shall have
no obligation to accept any form of consideration other than cash.
The maximum term of an option granted under the Plan is ten years (five
years in the case of an ISO granted to an employee who, at the time of the
grant, holds 10% or more of the Company's outstanding Common Stock ("10%
Shareholder")). The aggregate fair market value, on the date of grant, of the
stock for which ISOs are exercisable for the first time by an employee during
any calendar year may not exceed $100,000. The exercise price of ISOs granted
under the Plan must be not less than the fair market value of the Common
Stock at the date of grant (not less than 110% of fair market value in the
case of an option granted to a 10% Shareholder); the exercise price of NQSOs
(other than an option automatically granted to a Committee member) is
determined by the Committee at the time of the option grant but cannot be
less than 85% of the fair market value at the time of grant. Including all
prior grants then outstanding, as of December 31, 1997 there were 6,780,000
shares subject to option under the Plan at various exercise prices, of which
3,665,000 were then exercisable. As of March 23, 1998, the fair market value
of a share of Common Stock was $30.72.
B-1
<PAGE>
Under the Plan, an optionee who terminates employment with the Company
may exercise ISOs for a period of three months after termination of
employment (but not beyond the option period) for the number of shares vested
on the date of termination. If an optionee becomes disabled, as determined by
the Company, or dies while an employee of the Company, any ISOs held by the
optionee will continue in effect and may be exercised in accordance with
their terms for the number of shares vested on the date of disability or
death for a period of twelve months from the date of the optionee's
disability or death (but not beyond the option period). In the case of NQSOs,
if an optionee ceases to be an employee or director of the Company, the NQSOs
held by the optionee will continue in effect and may be exercised in
accordance with their terms (but not beyond the option period) for the number
of shares vested on the date of such cessation. Notwithstanding the
foregoing, if the termination of an optionee's position as a director,
officer or employee of the Company is for gross misconduct, his or her
options under the Plan will be canceled and the optionee will have no right
to exercise any part of those options after such termination.
The vesting of an option will be accelerated immediately without any
further action upon any of the following events: (i) the acquisition of more
than 50% of the voting power of the Company by any person, (ii) a change in
the composition of the members of the Board over a three-year period or less
to include a majority of persons not serving on the Board at the beginning of
the period or nominated by such persons, or (iii) approval by the Company's
stockholders of (A) a merger or consolidation in which the Company is not the
surviving entity, (B) the sale of all or substantially all of the assets of
the Company, or (C) any reverse merger in which the Company is the surviving
entity in which holders of the Company's voting securities prior to the
merger do not own at least 50% of the voting power in the Company immediately
after the merger.
The number of shares subject to the Plan and to options granted under the
Plan and the exercise price of outstanding options are subject to adjustment
by the Committee in the event of increases or decreases in the number of
outstanding shares of Common Stock through stock splits, stock dividends,
reclassifications of the outstanding capital stock and similar events.
Options granted under the Plan will generally be nontransferable by the
optionee.
Except for the provisions relating to the grant of options to Committee
members, the Plan may be amended at any time by the Board, although certain
amendments require stockholder approval. The Board may not amend the Plan's
automatic grant provisions for Committee members more than once in any six
month period except as required to comply with the requirements of the
Internal Revenue Code. The Plan will terminate ten years after its adoption
by the Company unless earlier terminated by the Board.
The Plan, as it relates to grants of options to Committee members and
executive officers of the Company, is designed to comply with Rule 16b-3 of
the Securities Exchange Act of 1934. In the event that Rule 16b-3 is amended,
the Plan may be amended by the Board, without shareholder approval, to delete
any provisions of the Plan no longer required by Rule 16b-3.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. If an option under the Plan is treated as an ISO,
the optionee generally recognizes no regular taxable income as the result of
the grant or exercise of the option. However, an amount equal to the
difference between the fair market value of the stock on the date of exercise
and the exercise price is classified as an item of alternative minimum
taxable income in the year of exercise for purposes of the alternative
minimum tax.
The Company will not be allowed a deduction for federal income tax
purposes in connection with the grant or exercise of an ISO, regardless of
the applicability of the alternative minimum tax to the optionee. The Company
will be entitled to a deduction, however, to the extent that ordinary income
is recognized by the optionee upon a disqualifying disposition (see below).
Upon a sale or exchange of the shares at least two years after the grant
of an ISO and one year after exercise of the option, gain or loss will be
recognized by the optionee equal to the difference between the sale price and
the exercise price. Such gain or loss will be characterized for federal
income tax purposes as long-term capital gain or loss. The Company is not
entitled to any deduction under these circumstances.
B-2
<PAGE>
If an optionee disposes of shares acquired upon issuance of an ISO prior
to completion of either of the above holding periods, the optionee will have
made a "disqualifying disposition" of the shares. In such event, the optionee
will recognize ordinary income at the time of disposition equal to the
difference between the exercise price and the lower of the fair market value
of the stock at the date of the option exercise or the sale price of the
stock. The Company generally will be entitled to a deduction in the same
amount as the ordinary income recognized by the optionee on a disqualifying
disposition if the optionee's total compensation is deemed reasonable in
amount.
The optionee also will recognize capital gain or loss on such
disqualifying disposition in an amount equal to the difference between (i)
the amount realized by the optionee upon such disqualifying disposition of
the stock and (ii) the exercise price, increased by the total amount of
ordinary income, if any, recognized by the optionee upon such disqualifying
disposition (as described in the second sentence of the preceding paragraph).
Any such capital gain or loss resulting from a disqualifying disposition of
shares acquired upon exercise of an ISO will be long-term capital gain or
loss if the shares with respect to which such gain or loss is realized have
been held for more than twelve months.
NQSOs. An optionee generally recognizes no taxable income as the result of
the grant of an NQSO, assuming that the option does not have a readily
ascertainable fair market value at the time it is granted (which is usually
the case with plans of this type). Upon exercise of an NQSO, an optionee will
normally recognize ordinary compensation income for federal tax purposes
equal to the excess, if any, of the then fair market value of the shares over
the exercise price. Optionees who are employees will be subject to
withholding with respect to income recognized upon exercise of a NQSO.
The Company will be entitled to a tax deduction to the extent and in the
year that ordinary income is recognized by the exercising optionee, so long
as the optionee's total compensation is deemed reasonable in amount.
Upon the sale of shares acquired pursuant to the exercise of an NQSO, any
difference between the sale price and the fair market value of the shares on
the date of exercise will be treated as capital gain or loss and will qualify
for long-term capital gain or loss treatment if the shares have been held for
more than twelve months.
Section 162(m) of the Code. Under Section 162(m) of the Code, compensation
paid in any year to any of the Company's five most highly compensated
executive officers is potentially nondeductible by the Company to the extent
that it exceeds $1,000,000. However, certain "performance-based compensation"
is exempt from the $1,000,000 cap on deductibility.
The Plan contains provisions designed to enable grants of options to the
Company's five most highly compensated executive officers to qualify as
"performance-based compensation" provided that the option grants: (i) are
made by a committee of the Board of Directors consisting solely of two or
more "outside directors" (as that term is specially defined for purposes of
Section 162(m)) and (ii) have a per share option exercise price at least
equal to the per share fair market value (on the grant date) of the stock
subject to the option. The Committee will determine whether any such
qualifying grants are to be made. In addition, the maximum number of shares
with respect to which options may be granted to any individual per calendar
year under the Plan cannot exceed 1,000,000 shares.
B-3
<PAGE>
PROXY
[CALENERGY LOGO]
PROXY SOLICITATION
CALENERGY COMPANY, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR THE ANNUAL MEETING MAY 21, 1998
The undersigned hereby appoints David L. Sokol, Craig M. Hammett and
Steven A. McArthur, or any one of them, with full power of substitution,
attorneys and proxies of the undersigned, to represent the undersigned and vote
all shares of Common Stock par value $0.675, of CalEnergy Company, Inc., which
the undersigned would be entitled to vote if personally present at the annual
meeting of Stockholders to be held at The Joslyn Art Museum, 2200 Dodge Street,
Omaha, Nebraska on May 21, 1998 at 9:00 a.m., local time, and any adjournments
thereof, on all matters coming before said meeting and in the following manner:
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on the other side)
FOLD AND DETACH HERE
<PAGE>
[X] Please mark
your votes
like this in blue
or black ink
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1 AND
"FOR" PROPOSALS 2 AND 3
WITHHOLD
FOR all authority to vote
Nominees for all nominees
1.ELECTION OF DIRECTORS:
WALTER SCOTT, JR [ ] [ ]
JOHN R. SHINER
EDGAR D. ARONSON
BERNARD W. REZNICEK
WITHHELD for the following only: [Write the name of the nominee(s) in the
space below.] _________________________________________________________________
FOR AGAINST ABSTAIN
2. PROPOSAL TO APPROVE AN AMENDMENT [ ] [ ] [ ]
OF THE EMPLOYEE STOCK OPTION
PLAN TO INCREASE THE OPTION
SHARES AVAILABLE FOR GRANT
BY 1,000,000.
FOR AGAINST ABSTAIN
3. PROPOSAL TO RATIFY THE [ ] [ ] [ ]
APPOINTMENT OF DELOITTE & TOUCHE LLP,
CERTIFIED PUBLIC ACCOUNTANTS AS THE
COMPANY'S AUDITORS FOR FISCAL YEAR 1998.
Signature(s)________________________________________________ Date ____________
Please sign above exactly as your name or names appear hereon. Joint owners
should each sign personally. Corporate proxies should be signed in full
corporate name by an authorized officer. Fiduciaries should give full titles
as such. PLEASE MARK, DATE, SIGN, AND MAIL PROMPTLY IN THE POSTAGE-PAID
ENVELOPE ENCLOSED. If no instructions are provided in this proxy, it will be
voted FOR the Board's nominees for directors and FOR Proposals 2 and 3.
FOLD AND DETACH HERE
